Under competitive pressure, airlines are moving away from holding huge (and hugely expensive) parts stocks to support operations. But they still seek the extremely reliable dispatch these stocks supported.

The new approach requires getting the right parts to the right place at the right time, and it is tricky. It requires sufficient scale, sophisticated forecasting, well-placed stocks and smart logistics. Airlines can perform some of these tasks, but OEMs and other companies are responsible for an increasing share.

Airline MRO software Trax forecasts both consumables and rotables. Task orders from OEMs tell Trax and airline users which scheduled consumables are needed, explains Managing Director Chris Reed.

Trax uses historical data to forecast demand for unscheduled consumables. Users set the amount of time a needed part must be available. Trax optimization routines then use costs and criticality to set reorder points. Trax also calculates the economic order quantity (EOQ) that minimizes inventory and ordering costs according to the Wilson Formula, one of the oldest production scheduling models.

Trax sets the inventory of rotables based on several factors. Mean time between failures (MTBF) influences spares and repairs. Mean time between removals (MTBR) influences spares only. Fleet size, transport cost and time, internal or external repair time and repair cost also go into the calculation. Reliability reports are used for MTBF and MTBR.

Trax forecasts part requirements for airframes and components, but not engines.  

Not all customers use all Trax part-forecasting capabilities. Small airlines may only want EOQ. Larger airlines set up and manage optimization algorithms. If a carrier is on a flight-hour program with a provider, Trax routines can be turned off by ATA Chapter or by part number.

Mxi’s Maintenix forecasts are similar to those of Trax, with several important differences. Product Marketing Manager James Elliott says planned rotable and consumable requirements are based on flight hours, landings and other parameters. Reliability reports help forecast unplanned parts needs.

But Maintenix also forecasts engine-part requirements, based on tools developed with the U.S. Navy, where overhaul time was halved by ensuring parts were ready. And Maintenix’s configuration management ensures that scheduled parts exactly suit aircraft by tail number, not just model or variant.

Benefits have been significant. Latam Airlines has used Maintenix to eliminate delays caused by lack of materials and to reduce gross part stocks by 10%.

While airlines have good forecasting tools, most lack the scale to forecast unscheduled part requirements precisely. And airlines often have limited stocking choices and logistics expertise. Enter the parts-management specialist.       

John Avery, director of Supply Chain Solutions at AJW Aviation, says his company’s flight-hour programs aim at very specific key performance indicators (KPI) such as target costs, technical dispatch reliability and material cost per flight-hour or cycle.

Long-term, special packages usually support engines and landing gear. Of the rest, 80-90% of cost is for rotables, the remainder for consumables.

The key to controlling consumable costs is “managing the complexity of many parts costing small dollars each,” he explains. Often complexity is handled by highly specialized distributors who work with just a few—say 200—part numbers that they can deliver rapidly.

AJW handles consumable complexity differently. Via the consignment option, it delivers parts to airlines, monitors use and replenishes when stocks hit the reorder point. The company can buy cheaply in volume and ship economically also, as it is usually shipping components to the airline several times a week and just adds in piece parts. The airline gets parts without minimum orders, and its in-house engineers concentrate on modification work and other tasks that outsiders cannot do.

The MRO provider knows when to replenish rotable stocks because it makes usage forecasts based on nearly 500 aircraft under flight-hour contracts for rotables. The law of large numbers reduces variation in requirements. “If you need $5 million in rotables for one aircraft, you need $8 million for two,” Avery explains. Scale economies continue up to about 200 aircraft. AJW can help even much larger fleets—for example, U.S. majors when they fly to Europe, far from their base stocks.    

Scale also justifies AJW’s large technical department, which gets better with experience at managing repairs and arranging warranty coverage. And scale pays for AJW’s highly sophisticated part-forecasting system.

AJW recommends airlines lease their main base kits so they retain flexibility to re-fleet with other models or variants. The company can reposition leased stocks where needed.

Making it all work starts with forecasting and IT. “If you don’t have a good information system, you will be dead in 90 days,” Avery stresses. “You will lose track of stuff.” In addition, AJW does three things very well: customer service, logistics and holding a large inventory.

Logistics ensures the right parts are in the right amounts at each warehouse after a receiving inspection and are put on the shelf and row where they belong. Then parts are packed correctly with the right paperwork, photographed to show condition, shipped by the best option, and finally tracked step-by-step.

AJW staffs its own warehouse, but contracts out transport, mostly to DHL, FedEx and B&H Worldwide. When a van leaves an AJW warehouse, another has to be there in 15 min. Customers have complete visibility into shipments, including cellphone numbers of drivers in transit.

The results can be measured. Avery says AJW flight-hour support can cut direct costs for fleets of 10-15 aircraft by 20-25%. These costs will be predictable and lower in winter, when revenue is down, higher in the active summer months. AJW also helps get technical dispatch reliability up, although this KPI depends on other factors.

Parts traders are also active. Avtrade has developed an in-house, web-based interface that provides real-time ordering, availability and documentation to customers, explains Regional Marketing Director Toby Winkworth. Customers also benefit from Avtrade’s experience in forecasting removal rates.

Avtrade stocks are kept at a new logistics center in the U.K. and hubs in the U.S., UAE and Singapore. The company has relationships with most global freight providers, including specialists in engines, AOG situations and hazardous materials.

OEMs increasingly manage part supplies for their products. For example, Rockwell Collins is seeing a steady trend from transaction-based support toward more integrated solutions, including its Total Dispatch Reliability program, says Thierry Tosi, vice president of service solutions. He predicts 70% of Rockwell support will be integrated in 10 years. Half of Boeing 787 support already is. 

Rockwell must invest in parts pools before they reach self-sustaining size. Some customers want local pools and to tap global stocks for replenishment. Global stocks are now kept in three centers at or near hubs in America, Europe and Asia. A Middle East warehouse may be added in the future.

Rockwell forecasts parts requirements for both transactions and integrated contracts, but the forecast is more important for integrated deals, as the OEM guarantees airlines always will have needed parts on site. Forecasts are based on usage for older equipment and on engineering data for new components. Rockwell must predict MTBR and MTBF separately due to no fault founds. The company can help airlines forecast requirements even if they are not using integrated solutions.

Gains from relying on integrated solutions vary by carrier, and Tosi does not see airline spreadsheets. But he notes that airlines—including some very large ones—are shifting to this support model, so benefits must be attractive. A Rockwell subsidiary now buys aircraft for tear-down, and the company has committed to flexible support at affordable pricing.

Engine makers started the flight-hour approach and pursue it aggressively. Pratt & Whitney certainly has the necessary scale, with 11,000 engines operating. Forty percent of PW4000s are under flight-hour support, as are 60% of V2500s. Ajay Agrawal, vice president of commercial aftermarket, expects 80% of GTFs to be similarly covered.

Pratt stocks 20,000 new part numbers and 25,000 numbers of surplus parts. It commits to fulfilling orders promptly 95% of the time and is hitting 97% currently.

“Forecasting is the backbone,” Agrawal stresses. Pratt uses SAP forecasting and planning tools (see related story, MRO22), plus in-house applications and a team of PhDs to constantly refine forecast algorithms. These are based on shop visits, work scopes, historical demand and data on engine operation, especially from flight-hour customers. Forecasts are 98% accurate, and Pratt is investing in Big Data tools to improve them further.

New parts are held in the Netherlands and at Atlanta Hartsfield Airport, surplus parts in Dallas. Only airlines that overhaul their own engines have much in the way of on-site inventory.

UPS provides logistics at all stocking locations, running warehouses in partnership with Pratt staff, and managing transportation. Most parts are shipped in three days, but life-limited parts can take up to a month.